[Federal Register Volume 81, Number 188 (Wednesday, September 28, 2016)]
[Proposed Rules]
[Pages 66545-66553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23289]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 81, No. 188 / Wednesday, September 28, 2016 / 
Proposed Rules  

[[Page 66545]]



FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1263

RIN 2590-AA85


Federal Home Loan Bank Membership for Non-Federally-Insured 
Credit Unions

AGENCY: Federal Housing Finance Agency.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: The Federal Housing Finance Agency (FHFA or Agency) is 
proposing to amend its regulations governing Federal Home Loan Bank 
(Bank) membership to implement section 82001 of the Fixing America's 
Surface Transportation Act, which amended section 4(a) of the Federal 
Home Loan Bank Act (Bank Act) to authorize certain credit unions 
without Federal share insurance to become Bank members. This proposed 
rule also would make appropriate conforming changes to FHFA's 
membership regulations.

DATES: Written comments must be received on or before November 28, 
2016.

ADDRESSES: You may submit your comments, identified by Regulatory 
Information Number (RIN) 2590-AA85, by any of the following methods:
     Agency Web site: www.fhfa.gov/open-for-comment-or-input.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comment to the Federal eRulemaking Portal, please also send it by email 
to FHFA at [email protected] to ensure timely receipt by the agency. 
Please include Comments/RIN 2590-AA85 in the subject line of the 
message.
     Courier/Hand Delivery: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA85, 
Federal Housing Finance Agency, 400 Seventh Street SW., Eighth Floor, 
Washington, DC 20219. Deliver the package to the Seventh Street 
entrance Guard Desk, First Floor, on business days between 9 a.m. to 5 
p.m.
     U.S. Mail, United Parcel Service, Federal Express or Other 
Mail Service: The mailing address for comments is: Alfred M. Pollard, 
General Counsel, Attention: Comments/RIN 2590-AA85, Federal Housing 
Finance Agency, 400 Seventh Street SW., Eighth Floor, Washington, DC 
20219.

FOR FURTHER INFORMATION CONTACT: Eric M. Raudenbush, Associate General 
Counsel, Office of General Counsel, [email protected], (202) 
649-3084; or Julie Paller, Senior Financial Analyst, Division of Bank 
Regulation, [email protected], (202) 649-3201 (not toll-free 
numbers), Federal Housing Finance Agency, 400 Seventh Street SW., 
Washington, DC 20219. The telephone number for the Telecommunications 
Device for the Hearing Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Comments

    FHFA invites comments on all aspects of the proposed rule and will 
take all comments into consideration before issuing a final rule. All 
comments received will be posted without change on the FHFA Web site at 
http://www.fhfa.gov, and will include any personal information 
provided, such as name, address (mailing and email), and telephone 
numbers. In addition, copies of all comments received will be available 
without change for public inspection on business days between the hours 
of 10 a.m. and 3 p.m., at the Federal Housing Finance Agency, 400 
Seventh Street SW., Washington, DC 20219. To make an appointment to 
inspect comments, please call the Office of General Counsel at (202) 
649-3804.

II. Background

    Under the Bank Act, federally insured depository institutions, 
including state- and federally chartered credit unions whose member 
accounts are insured by the National Credit Union Share Insurance Fund 
(NCUSIF), have been eligible for Bank membership since 1989. Until 
recently, however, state-chartered credit unions without Federal share 
insurance were ineligible for Bank membership, except to the limited 
extent that a credit union certified as a ``community development 
financial institution'' (CDFI) could meet the eligibility requirements 
applicable to CDFIs. In December 2015, Congress amended the Bank Act to 
authorize the Banks to consider applications for membership from state-
chartered credit unions without Federal share insurance and to approve 
such applicants for Bank membership (irrespective of their CDFI 
status), provided that certain prerequisites have been met.\1\ This 
proposed rule would implement those statutory amendments.
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    \1\ Fixing America's Surface Transportation Act (FAST), Public 
Law 114-94, section 82001(a), 129 Stat. 1795 (2015), codified at 12 
U.S.C. 1424(a)(5)(A) and (B).
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A. Amendment of the Bank Act To Authorize Membership for Non-Federally-
Insured Credit Unions

    Section 4 of the Bank Act specifies the types of institutions that 
may be eligible for membership in one of the eleven district Banks and 
establishes requirements that each of those types of institutions must 
meet in order to be eligible for Bank membership.\1\ When enacted as 
part of the original Bank Act in 1932, section 4 authorized thrift 
institutions of various types, as well as insurance companies, to 
become Bank members, provided that the institution met the applicable 
eligibility requirements. At that time and for many decades afterward, 
the statute did not permit credit unions to become Bank members. This 
changed in 1989, when Congress amended section 4 to add ``insured 
depository institution[s]'' to the list of entities that may be 
eligible for Bank membership and defined that term to include any 
depository institution the accounts of which are insured by the Federal 
Deposit Insurance Corporation (FDIC) or by the NCUSIF.\2\ In effect, 
those amendments authorized federally insured commercial banks and 
credit unions to become Bank members for the first time. Commercial 
banks without Federal deposit insurance and credit unions without 
Federal share insurance remained ineligible for Bank membership even 
after the 1989 amendments.
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    \1\ See 12 U.S.C. 1424.
    \2\ See Financial Institutions Reform, Recovery, and Enforcement 
Act of 1989 (FIRREA), Public Law 101-73, section 704, 103 Stat. 183, 
415 (1989).
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    In 2008, Congress amended the Bank Act to authorize entities 
certified as CDFIs by the CFDI Fund of the United

[[Page 66546]]

States Department of the Treasury to become Bank members, provided the 
CDFI meets the membership eligibility requirements established for such 
entities. By law, credit unions--including state-chartered credit 
unions without Federal share insurance--may be certified as CDFIs.\3\ 
Thus, since the adoption of the 2008 statutory amendments, a credit 
union that would otherwise have been ineligible for Bank membership due 
to a lack of Federal share insurance may nonetheless be eligible for 
membership if it is certified as a CDFI and meets the eligibility 
requirements applicable to CDFIs.
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    \3\ See 12 U.S.C. 4701-4719; 12 CFR part 1805.
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    To implement those statutory amendments, FHFA in January 2010 
adopted amendments to part 1263 to address membership eligibility and 
application requirements for CDFIs and to clarify the types of entities 
to be treated as CDFIs for membership purposes.\4\ That rule defined 
``CDFI'' to mean any entity that the CDFI Fund has certified as a 
community development financial institution, with the exception of 
federally insured banks, thrifts, and credit unions.\5\ As insured 
depository institutions under the Bank Act, the latter types of 
entities had already been eligible for Bank membership prior to the 
enactment of the statutory provisions authorizing membership for CDFIs. 
By excluding federally insured depositories from the definition of 
``CDFI,'' FHFA effectively required that they continue to be treated 
solely as insured depository institutions under the membership 
regulation, even in cases where the institution has been certified as a 
CDFI. In explaining its decision, the Agency cited its conclusion that, 
while Congress adopted the 2008 amendments to provide a new avenue to 
membership for CDFIs that had not previously been eligible, it did not 
intend to provide an additional avenue to membership for federally 
insured depository institutions that had already been eligible under 
the prior law.\6\
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    \4\ 75 FR 678 (Jan. 5, 2010).
    \5\ See 12 CFR 1263.1.
    \6\ 75 FR at 681.
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    While it effectively required that a federally insured credit union 
certified as a CDFI be treated as an insured depository institution for 
Bank membership purposes, the 2010 rule mandated different treatment 
for state-chartered credit unions without Federal share insurance that 
have been certified as a CDFI--a type of entity that the rule termed a 
``CDFI credit union.'' As amended by the 2010 rule, the membership 
regulation treats CDFI credit unions as a type of CDFI and generally 
subjects them to the same standards that apply to non-depository CDFIs, 
with the exception of those that must be met in order for an applicant 
to be deemed in compliance with the statutory eligibility requirement 
that an institution's financial condition be ``such that advances may 
be safely made to it.'' \7\ With respect to the latter requirement, the 
regulation requires that CDFI credit unions demonstrate compliance in a 
manner similar to that which had already been required of all other 
types of depository institution applicants prior to the 2010 
rulemaking.\8\ For non-depository CDFIs, such as loan funds and venture 
capital funds, the 2010 final rule established separate financial 
condition requirements that were tailored to the unique structure and 
business of those entities.\9\
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    \7\ See 12 U.S.C. 1424(a)(2)(B).
    \8\ See 12 CFR 1263.11(b).
    \9\ See 12 CFR 1263.16(b).
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    In December 2015, Congress again amended section 4 of the Bank Act, 
in this case to permit state-chartered credit unions without Federal 
share insurance to be approved for Bank membership (irrespective of 
their CDFI status) where the credit union meets the membership 
eligibility requirements applicable to insured depository institutions 
and has taken enumerated steps to demonstrate that it meets the 
requirements for Federal share insurance, notwithstanding that it is 
not actually federally insured.\10\ Specifically, new section 4(a)(5) 
states that a credit union lacking Federal share insurance that has 
applied to become a member of a Bank shall be treated as an insured 
depository institution for purposes of determining its eligibility for 
Bank membership, provided that its state credit union regulator has 
first determined that the institution met the requirements for Federal 
share insurance as of the date of its application for membership.\11\ 
However, the new provision also provides that if the state regulator 
for such an applicant fails to make a determination as to whether the 
applicant met the requirements for Federal share insurance before the 
expiration of the six-month period that begins on the date of its 
application for membership, then the credit union applicant shall be 
deemed to have met those requirements.\12\
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    \10\ Public Law 114-94, section 82001(a), 129 Stat. 1795 (2015).
    \11\ 12 U.S.C. 1424(a)(5). Although the statutory text actually 
refers several times to ``Federal deposit insurance,'' FHFA 
construes those references to mean the federal share insurance that 
is provided to credit unions by the NCUSIF, in light of the evident 
purpose for which Congress adopted the NFICU amendments.
    \12\ 12 U.S.C. 1424(a)(5)(B)(ii).
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    Consistent with the regulatory definitions that would be in effect 
under the proposed rule, this Supplementary Information refers to 
credit unions without Federal share insurance that are not certified as 
CDFIs as ``non-federally-insured credit unions'' or ``NFICUs'' and to 
credit unions without Federal share insurance that are certified as 
CDFIs as ``CDFI credit unions.'' As discussed below, under the proposed 
rule, CDFI credit unions would continue to be treated as they are under 
the existing regulation and would not be subject to the new regulatory 
provisions governing NFICUs.

B. Letters to Banks Providing Guidance on the Treatment of NFICUs Under 
the 2015 Statutory Amendments

    On April 12, 2016, in response to requests from several Banks for 
guidance addressing the manner in which they may accept and process 
membership applications from NFICUs that are newly eligible under the 
recent statutory amendments, FHFA sent a letter to each Bank describing 
how it should comply with the new statutory provisions. The guidance 
letters addressed the substantive requirements of the statutory 
amendments, the procedures each Bank should follow in processing 
applications, and the actions the Bank should take to document 
compliance with the new eligibility requirements. The letters also 
noted the Agency's intent to initiate a rulemaking to codify the 
substance of the guidance and advised each Bank to process membership 
applications from NFICUs in accordance with the guidance until FHFA 
adopts a final rule implementing the new statutory provisions.
    The amended statute provides that an NFICU may be eligible for Bank 
membership only if its state regulator has determined that it meets all 
the requirements for Federal share insurance ``as of the date of the 
application for membership.'' \13\ With respect to the nature of this 
determination, the guidance letters expressed FHFA's view that the 
statute requires that the state regulator of an NFICU applicant 
determine that the applicant actually satisfies all of the applicable 
eligibility requirements for NCUSIF share insurance under the Federal 
Credit Union Act \14\ and the implementing regulations of the NCUA.\15\ 
In response to specific

[[Page 66547]]

questions FHFA had received, the guidance clarified that a 
determination by a state regulator that a particular NFICU applicant is 
``eligible to apply'' for NCUA insurance or is operating and in good 
standing under state law is not sufficient to satisfy the statutory 
requirement.
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    \13\ 12 U.S.C. 1424(a)(5)(B)(i).
    \14\ 12 U.S.C. 1751 et seq.
    \15\ 12 CFR part 745.
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    The guidance also addressed the meaning of the term ``date of the 
application for membership,'' which Congress designated as the date as 
of which the state regulator is to determine whether an NFICU meets the 
eligibility requirements for Federal share insurance and on which 
begins the statutory six-month period after which an NFICU shall be 
deemed to meet those requirements if its state regulator fails to act. 
Because Congress did not specify precisely what constitutes the ``date 
of the application,'' FHFA construed the term consistently with similar 
language in the existing membership regulation. The guidance explained 
that the ``date of the application'' should be the date on which an 
NFICU has provided to a Bank a ``complete'' membership application--
i.e., an application that includes all information that is required to 
assess the applicant's compliance with the applicable statutory and 
regulatory membership eligibility requirements, as well as any other 
information the Bank deems necessary to act on an application. The 
existing membership regulation uses this concept of a ``complete'' 
application to establish the starting point of the 60-day period during 
which a Bank is generally required to make a determination on a 
membership application.\16\
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    \16\ See 12 CFR 1263.3(c).
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    The guidance stated that a Bank generally should process a 
membership application from an NFICU in the same manner it would 
process a membership application from a federally insured credit union, 
up to the point when the Bank determines that the NFICU has provided 
all information required to assess its compliance with the applicable 
membership eligibility requirements. The existing membership regulation 
requires that, once a Bank makes such a determination with respect to 
the application of a federally insured credit union (or that of any 
other type of applicant), it must inform the applicant that the 
application is ``complete'' and generally must act on the application 
within 60 days. The guidance, however, advised that, when a Bank has 
made such a determination with respect to the application of an NFICU, 
the Bank should instead inform the NFICU that its application is 
``provisionally complete'' and that it must take further steps before 
the application may be deemed fully complete and ready to be acted 
upon. Under the guidance, a Bank is to regard an NFICU's application to 
be only ``provisionally'' complete at that point because it would not 
include the documentation that the NFICU's state regulator either has 
determined that the applicant satisfied the requirements for Federal 
share insurance as of the date of the application or has failed to make 
that determination within six months. The guidance advised that, when 
informing an NFICU applicant that its application is provisionally 
complete, a Bank should instruct it to make a written request of its 
state regulator for a determination that the NFICU satisfied all of the 
eligibility requirements for Federal share insurance as of the date of 
that request, and to provide a copy of that request to the Bank on the 
same day it transmits the request to the regulator.\17\
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    \17\ The guidance letters also included an example of a 
statement that an applicant could include in the request to its 
supervisor, which was intended to provide clarity as to the required 
nature of the request. The letters also noted that, in the event 
that a state supervisor were unable or unwilling to provide an 
affirmative response to the NFICU, then the applicant may ask the 
supervisor to provide a written statement to that effect.
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    With respect to the completion of the membership application, the 
guidance advised that a Bank should act on an NFICU's application only 
after having received one of the following three items: (1) An 
affirmative written response from the regulator that the NFICU meets 
the eligibility requirements for Federal share insurance; (2) a written 
statement from the regulator that it cannot or will not make any 
determination regarding the NFICU's eligibility for Federal share 
insurance; or (3) a written statement from the NFICU applicant that six 
months have expired from the date of the membership application without 
the state regulator providing any response to the NFICU's request. 
Items (1) and (3) above closely track the statutory requirements. 
Regarding item (2), FHFA concluded that, although the statute does not 
address the possibility that a state regulator may expressly decline to 
make a determination (as opposed to merely failing to respond to a 
request), it is permissible to consider such a written statement as the 
substantive equivalent of a failure to respond within six months. The 
Agency noted that the statutory six-month review period appeared to be 
intended to ensure that a state credit union regulator would have a 
sufficient amount of time to determine whether a particular credit 
union satisfied the requirements for Federal share insurance. The 
guidance reflected FHFA's belief that, in the event that a state 
regulator were to conclude that it could not make such a determination 
for any credit union due to a lack of familiarity with the NCUA 
underwriting process or for other reasons, receipt of a written 
statement to that effect will suffice to allow a Bank to approve an 
NFICU's membership application without waiting for the six-month period 
to expire.\18\ The guidance advised the Banks to retain in each NFICU 
applicant's membership file copies of the relevant documents, including 
the applicant's request to its state regulator and any response from 
the regulator or statement from the applicant that the regulator had 
not responded, as part of its required records for all membership 
applications.
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    \18\ FHFA is aware of one instance in which a state credit union 
regulator has advised a Bank that it could not make a determination 
regarding a state credit union's eligibility for federal share 
insurance because the state regulator was not familiar with the 
specific underwriting and related processes employed by NCUA when 
acting on applications for federal share insurance.
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    Finally, the guidance letters addressed the possibility that an 
existing Bank member that is a state-chartered federally insured credit 
union might voluntarily cancel its Federal share insurance, thus 
becoming an NFICU--a scenario that the new statutory provisions do not 
explicitly address. The guidance made clear that such a credit union 
may voluntarily surrender its Federal share insurance without 
jeopardizing its status as a Bank member and without having to request 
from its state regulator the type of determination that the statute 
requires to be made with respect to NFICU applicants. The guidance 
letters reasoned that NCUA's prior approval of the credit union for 
Federal share insurance is dispositive as to the key issue under the 
statutory amendments--i.e., whether the institution satisfies the 
eligibility requirements for Federal share insurance--thus obviating 
any need for the member's state regulator to make that same decision.

III. The Proposed Rule

    The proposed rule would codify into part 1263 of FHFA's regulations 
the core concepts of the guidance letters. The principal regulatory 
provisions regarding NFICUs would be located in a new Sec.  1263.19 (a 
reserved section number under the existing regulation), which would set 
forth the prerequisites that an NFICU must meet in order to be treated 
as an insured depository institution for purposes of determining

[[Page 66548]]

its eligibility for membership. As described in more detail below, the 
proposed rule would also make a number of conforming revisions to other 
sections of the regulation.

A. Primary Revisions

1. Definitions of NFICU and Insured Depository Institution--Sec.  
1263.1
    The proposed rule would define ``non-federally-insured credit 
union'' to mean a ``State-chartered credit union that does not have 
Federal share insurance and that has not been certified as a CDFI by 
the CDFI Fund.'' The proposed rule would not include CDFI credit unions 
within this definition, notwithstanding that they are also state-
chartered credit unions that do not have Federal share insurance. The 
existing regulation generally requires CDFI credit unions to comply 
with the membership eligibility requirements that are applicable to 
CDFIs generally, rather than those applicable to depository 
institutions, with the exception of provisions relating to the 
applicant's financial condition. The proposed rule would make no 
substantive changes to any of the provisions that currently apply to 
CDFI credit unions and would treat them separately from NFICUs for 
membership purposes.
    The definition of ``insured depository institution'' in the 
existing membership regulation follows the Bank Act definition of that 
term and includes any federally insured bank, savings association, or 
credit union. The proposed rule would revise the regulatory definition 
of ``insured depository institution'' to include, in addition to 
federally insured depository institutions, NFICUs meeting the 
prerequisites of proposed Sec.  1263.19. As an ``insured depository 
institution'' under the revised regulation, any qualifying NFICU 
applying for Bank membership would be subject to all of the provisions 
of the membership regulation that apply to insured depository 
institutions generally, except where otherwise provided. Thus, a 
qualifying NFICU applicant would be eligible for membership only if: It 
is duly organized under Federal or State law; it is subject to 
inspection and regulation under Federal or State banking laws, or 
similar laws; it makes long-term home mortgage loans; its financial 
condition is such that advances may be safely made to it (hereinafter 
the ``financial condition'' requirement); its management and its home 
financing policy are both consistent with sound and economical home 
financing;\19\ and it has at least 10 percent of its assets in 
``residential mortgage loans'' (hereinafter the ``10 percent'' 
requirement).\20\ With the exception of the financial condition 
requirement, an NFICU applicant would be required to demonstrate 
compliance with each of those eligibility requirements in the same 
manner that is required of insured depository institutions generally. 
As discussed below, the proposed rule would require an NFICU applicant 
to demonstrate compliance with the financial condition requirement in 
the same manner as a CDFI credit union.\21\
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    \19\ 12 CFR 1263.6(a).
    \20\ 12 CFR 1263.6(b). The Bank Act exempts certain smaller 
depository institutions--``community financial institutions'' 
(CFIs)--from the 10 percent requirement, but defines CFI to include 
only institutions the deposits of which are insured under the 
Federal Deposit Insurance Act (FDIA) that have total assets below a 
certain threshold amount. 12 U.S.C. 1422(10)A)(i), 1424(a)(4). 
Because a credit union cannot obtain deposit insurance under the 
FDIA, it cannot qualify as a CFI regardless of its level of total 
assets.
    \21\ See 12 CFR 1263.11(b).
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2. Prerequisites for an NFICU To Be Treated as an Insured Depository 
Institution--Sec.  1263.19
    The proposed rule would add to the membership regulation a new 
Sec.  1263.19, which would set forth the prerequisites that an NFICU 
must meet in order to be treated as an insured depository institution 
for purposes of determining its eligibility for membership. The 
substantive and procedural requirements set forth in proposed Sec.  
1263.19 are, in all material respects, identical to those set forth in 
the guidance letters, although the proposed rule would provide 
additional clarification on certain points. As described below, 
paragraph (a) of the new section would address the treatment of NFICUs 
that are applying for Bank membership, while paragraph (b) would 
address the status of any credit union that already is a Bank member 
but that opts to become an NFICU by canceling its Federal share 
insurance.
NFICUs Applying for Bank Membership
    Section 126319(a) addresses the prerequisites that must be met 
before a Bank may approve an NFICU applicant for membership. In 
parallel with the inclusion of qualifying NFICUs within the regulatory 
definition of ``insured depository institution,'' the introductory 
clause to this provision provides that an NFICU applicant shall be 
treated as an insured depository institution for purposes of 
determining its eligibility for membership, provided that it complies 
with all of the requirements of Sec.  1263.19(a).
    The proposed rule would first require that a Bank obtain from an 
NFICU applicant all of the information that the Bank generally requires 
to process membership applications from federally insured depository 
institutions, including all of the information needed to demonstrate 
compliance with the eligibility requirements described above. Once a 
Bank has obtained that information, the rule would require that the 
Bank notify the NFICU that its application is provisionally complete 
and that the NFICU should request from its state regulator a 
determination that it satisfies the requirements for obtaining Federal 
share insurance as of the date of the request.\22\ The notice must also 
inform the NFICU that its application will not be deemed to be complete 
until the Bank has received acceptable documentation pertaining to the 
regulator's response to the NFICU applicant's request.
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    \22\ The NFICU must simultaneously provide to the Bank a copy of 
its request to the state regulator. The guidance letters had 
included an example of language that an NFICU could use in its 
request to its state regulator, but the proposed rule would not do 
so. A number of NFICUs have since been admitted to membership, and 
appear to have encountered no difficulties in obtaining a response 
from the state regulators, which suggests that there is no need for 
the regulation to address this topic. Banks may continue to use the 
sample language if they choose to do so.
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    Proposed Sec.  1263.19(a)(3) would require a Bank to deem an 
NFICU's application to be complete after it has received any one of the 
following items: (1) A written statement from the regulator confirming 
that the NFICU satisfies the requirements for Federal share insurance; 
(2) a written statement from the regulator that it is unable to make 
that determination; or (3) a written statement from the NFICU that it 
has not received a response from the state regulator within the 
statutory six-month period, and that the regulator has not determined 
that the NFICU does not meet the requirements for Federal share 
insurance. Once a Bank has received one of those three items and has 
deemed the NFICU's application to be complete, the proposed rule would 
require that the Bank act upon the application in accordance with Sec.  
1263.3(c). That existing provision requires that a Bank notify an 
applicant when it deems the application to be complete and (with 
certain exceptions) either approve or deny the application within 60 
calendar days of the date it made that determination.\23\ The cross-
reference to

[[Page 66549]]

Sec.  1263.3(c) is intended to make clear that a Bank would be 
permitted the same amount of time to act upon a fully complete NFICU 
application as it has to act upon a complete application from any other 
type of eligible institution. However, given that an NFICU's 
application should already include all of the information needed to 
determine whether it meets the applicable membership eligibility 
requirements at the time it sends the request to its regulator, FHFA 
anticipates that in many cases Banks would be prepared to act upon an 
NFICU application shortly after receiving the required documentation 
regarding the response of the state regulator, especially when the 
regulator fails to respond within six months or does not provide a 
response until the end of that timeframe.
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    \23\ The regulation allows a Bank to suspend the 60-day review 
period if it subsequently determines that it does not in fact have 
all of the information that is required to process the application. 
In such cases, a Bank may require that the applicant provide 
additional information, but must resume the 60-day review period 
when the applicant supplies the requested information. 12 CFR 
1263.3(c).
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A Credit Union That Becomes an NFICU When Already a Member
    While proposed Sec.  1263.19(a) addresses the treatment of NFICUs 
applying to become a Bank member, Sec.  1263.19(b) addresses the status 
of any existing credit union Bank member that opts to become an NFICU 
by canceling its Federal share insurance. The guidance letters made 
clear that any such credit union may voluntarily surrender its Federal 
share insurance without affecting its status as a Bank member. 
Consistent with that position, proposed Sec.  1263.19(b) would 
explicitly authorize such a credit union to remain a member without 
requiring it to request a determination of its state regulator as to 
whether it meets the requirements for Federal share insurance. The 
proposed rule would require that the Bank determine that the member has 
canceled its Federal share insurance voluntarily--i.e., that NCUA has 
approved the credit union's request to terminate its Federal share 
insurance.\24\ The Banks could make this determination by obtaining a 
copy of NCUA's approval of the credit union's request to terminate its 
Federal insurance. Upon converting to an NFICU, the credit union would 
remain subject to all regulatory provisions that apply to insured 
depository institution members.
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    \24\ See 12 U.S.C. 1786(a) (voluntary termination of federal 
share insurance); 12 CFR 708b.201(d) (termination of federal share 
insurance requires prior approval of NCUA).
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    The recent statutory amendments focus on state-chartered credit 
unions that have not previously been eligible for Bank membership due 
to their lack of Federal share insurance; the amendments do not address 
whether all of the requirements that apply to NFICU applicants should 
also apply to existing Bank members that wish to surrender their 
Federal share insurance while remaining as members. As FHFA noted in 
the guidance letters, the key question with respect to whether any 
particular NFICU may be eligible for Bank membership under the 
statutory amendments is whether the institution actually meets all of 
the requirements for Federal share insurance. In the case of an 
existing Bank member that is a federally insured state-chartered credit 
union, NCUA has already definitively answered that question by having 
previously approved the credit union for Federal share insurance and 
having continued to provide that insurance up until the time the credit 
union voluntarily canceled it. For that reason, nothing would be gained 
by construing the statute as requiring existing credit union Bank 
members that voluntarily cancel their Federal share insurance to seek 
that same determination from their state regulators in order to remain 
a member as an NFICU.
    Requiring a Bank to confirm that the cancelation of a member's 
Federal share insurance was voluntary would provide reasonable 
assurance that the member satisfies the requirements for Federal share 
insurance and, thus, remains eligible for membership as an NFICU 
despite no longer being a federally insured depository institution. As 
noted above, the core requirement for NFICUs under the statutory 
amendments is a determination that the NFICU satisfies the requirements 
for Federal share insurance, and the best evidence that a newly 
converted NFICU satisfies those requirements would be that it had 
remained federally insured until voluntarily relinquishing the 
insurance. It is also possible, however, that a federally insured 
credit union could lose its Federal share insurance through an 
involuntary termination for cause by NCUA. If NCUA were to terminate a 
Bank member's share insurance involuntarily, then that institution 
would cease to be eligible for Bank membership because NCUA's action 
would demonstrate that the institution could not meet the prerequisites 
for membership as an NFICU and, without Federal share insurance, it 
would no longer be eligible for membership as a federally insured 
depository institution. In such a case, a Bank likely would be required 
to terminate the credit union's membership because, unless the credit 
union happened to be certified as a CDFI, it would no longer satisfy 
any of the provisions under which credit unions may eligible for 
membership.

B. Conforming Amendments

    The proposed rule would also make a number of conforming revisions 
to part 1263, which are discussed below.
1. Definitions--Sec.  1263.1
    In addition to the substantive revisions to Sec.  1263.1 that are 
discussed above, the proposed rule would make a number of non-
substantive revisions to that section. First, the rule would add a 
definition of ``Federal share insurance'' and define that term to mean 
``insurance coverage of credit union member accounts provided by the 
National Credit Union Share Insurance Fund under title II of the 
Federal Credit Union Act (12 U.S.C. 1781 et seq.).''
    The rule would also revise the definition of ``CDFI credit union,'' 
which is currently defined to mean ``a State-chartered credit union 
that has been certified as a CDFI by the CDFI Fund and that does not 
have Federal share insurance,'' to reverse the order of the two clauses 
so that it would instead refer to ``a State-chartered credit union that 
does not have Federal share insurance and that has been certified as a 
CDFI by the CDFI Fund.'' FHFA is proposing to make this minor change so 
that the definition of ``CDFI credit union'' will be structured in 
parallel with the definition of ``non-federally-insured credit union.'' 
The intent of this is to make clear that the amended regulation would 
address two types of state-chartered credit unions without Federal 
share insurance--those that are not certified as a CDFI (non-federally-
insured credit unions) and those that are certified as a CDFI (CDFI 
credit unions)--and would subject them to different membership 
requirements.
    In the definition of ``community development financial institution 
or CDFI,'' the proposed rule would revise the reference to ``a credit 
union insured under the Federal Credit Union Act (12 U.S.C. 1751 et 
seq.)'' to refer instead to ``a credit union that has Federal share 
insurance.'' FHFA is proposing this minor non-substantive change so 
that the terminology used in the definition of ``CDFI'' will be 
consistent with that in the proposed definitions of ``non-federally-
insured credit union'' and ``CDFI credit union,'' both of which would 
employ the newly-defined term ``Federal share insurance'' to refer to 
insurance obtained under the Federal Credit Union Act.
    Finally, the proposed rule would revise the definition of 
``regulatory financial report,'' which currently refers

[[Page 66550]]

to a financial report that an ``applicant'' is required to file with 
its regulator, to refer instead to a financial report that an 
``institution'' is required to file with its regulator. In addition to 
requiring a Bank to obtain information from applicants' regulatory 
financial reports for many purposes, FHFA's regulations also require 
that a Bank obtain information from members' regulatory financial 
reports in some circumstances. The proposed revision would make clear 
that the term ``regulatory financial report'' refers to the reports of 
both applicants and members.
2. Membership Application Requirements--Sec.  1263.2
    Section 1263.2(b) of the existing regulation requires a Bank to 
prepare for each applicant a written membership application digest 
addressing whether or not the applicant meets each of the applicable 
requirements for membership under the regulation. The proposed rule 
would revise that provision to require expressly that a Bank include in 
the application digest for each NFICU applicant a written summary of 
the manner in which the applicant has complied with the requirements of 
proposed Sec.  1263.19(a). FHFA would expect a Bank to note in the 
digest the date on which the NFICU applicant transmitted to its state 
regulator the request required under proposed Sec.  1263.19(a)(2), as 
well as the date on which the Bank received the written statement 
addressing the results of that request required under proposed Sec.  
1263.19(a)(3). The Agency would also expect the Bank to describe in the 
digest which of the three types of written statements that are 
permissible under Sec.  1263.19(a)(3) was used to satisfy the 
requirement of that provision.
    The proposed rule would also revise Sec.  1263.2(c), which requires 
a Bank to maintain a membership file for each applicant, to make clear 
that a Bank should include in the file for an NFICU applicant any 
documents required under proposed Sec.  1263.19.
3. Compliance With the Financial Condition Requirement--Sec.  1263.11
    Existing Sec.  1263.11 governs the manner in which Banks are to 
determine whether depository institution applicants, including insured 
depository institutions and CDFI credit unions, are in compliance with 
the statutory ``financial condition'' eligibility requirement. 
Paragraph (a) requires that a Bank review a number of different items 
regarding the financial condition of depository institution applicants, 
including: (1) Regulatory financial reports the applicant filed with 
its regulator for the last six calendar quarters and three year-ends; 
(2) the applicant's most recent audited financial statements; (3) the 
applicant's most recent regulatory examination report; (4) a written 
description of any outstanding enforcement actions against the 
applicant; and (5) any other relevant document or information 
concerning the financial condition of the applicant that comes to the 
Bank's attention.
    In its 2010 final rule amending part 1263 to implement the 
statutory amendments that authorized Bank membership for CDFIs, FHFA 
revised Sec.  1263.11(a) to make clear that the review requirement 
applies to CDFI credit unions, in addition to other types of depository 
institutions. In explaining its decision to make that revision, the 
Agency explained that ``[a]lthough CDFI credit unions do not file 
regulatory financial reports with the NCUA, they do file comparable 
reports with their appropriate state regulator, and FHFA believes that 
those documents may be used to assess the financial condition of the 
CDFI credit unions.'' \25\ Similarly, Banks can and should use 
financial reports filed by NFICU applicants with their state regulators 
to assess the applicants' financial condition. Although the proposed 
rule would not revise Sec.  1263.11(a) to refer expressly to NFICUs, 
the review requirements of that provision would nonetheless apply in 
the case of NFICU applicants, given that NFICUs meeting the 
prerequisites of Sec.  1263.19 would generally be treated as insured 
depository institutions for purposes of determining their eligibility 
for membership under the amended regulation.
---------------------------------------------------------------------------

    \25\ 75 FR at 684.
---------------------------------------------------------------------------

    Existing Sec.  1263.11(b) establishes three standards that a 
depository institution applicant must meet to be deemed in compliance 
with the ``financial condition'' requirement: (1) It must have received 
a composite regulatory examination rating from its state regulator 
within the preceding two years; (2) it must meet all of its minimum 
statutory and regulatory capital requirements; and (3) it must meet the 
``minimum performance standard'' described in Sec.  1263.11(b)(3). The 
latter provision deems any applicant that received a composite rating 
of ``1'' on its most recent regulatory examination, except for a CDFI 
credit union, to be automatically in compliance with the ``minimum 
performance standard.'' \26\ That provision requires that any non-CDFI 
depository institution with an examination rating of ``2'' or ``3,'' as 
well as any CDFI credit union regardless of its examination rating, 
satisfy performance trend criteria relating to its (A) earnings (the 
applicant must have positive income in four of the six most recent 
quarters), (B) nonperforming assets (nonperforming loans and leases 
plus other real estate owned must not exceed 10 percent of total loans 
and leases plus other real estate owned in the most recent quarter), 
and (C) allowance for loan and lease losses (the ratio must have been 
60 percent or greater during four of the six most recent quarters) in 
order to meet the ``minimum performance standard.'' \27\
---------------------------------------------------------------------------

    \26\ 12 CFR 1263.11(b)(3)(i), (iii).
    \27\ 12 CFR 1263.11(b)(3)(i).
---------------------------------------------------------------------------

    In adopting its final rule on membership for CDFIs in 2010, FHFA 
decided to require all CDFI credit union applicants--including those 
with a current state examination rating of ``1''--to demonstrate 
compliance with the performance trend criteria specified in Sec.  
1263.11(b)(3), while continuing to exempt other types of depository 
institutions having a ``1'' rating from that requirement. In the 
Supplemental Information to the 2010 final rule, FHFA described its 
decision to require that even the most highly rated CDFI credit unions 
satisfy the performance trend criteria as ``prudent.'' The Agency noted 
that, because such institutions are not subject to oversight by the 
NCUA and because they had not previously been eligible for membership, 
the Banks were likely to be less familiar with the state examination 
processes and ratings systems to which they are subject than with those 
that apply to federally insured depository institutions.\28\
---------------------------------------------------------------------------

    \28\ 75 FR at 684-685.
---------------------------------------------------------------------------

    For similar reasons, the proposed rule would revise Sec.  
1263.11(b)(3)(iii) to require that NFICUs meet the minimum performance 
standard in the same way that CDFI credit unions must under the 
existing provision--that is, by having received a ``1,'' ``2,'' or 
``3'' composite rating in its most recent regulatory examination and by 
meeting the performance trend criteria for earnings, nonperforming 
assets, and allowance for loan and lease losses. FHFA believes that, 
given the Banks' lack of experience with non-federally-insured credit 
unions, it is also prudent to require all NFICUs to meet the 
performance trend criteria as part of satisfying the ``financial 
condition'' eligibility requirement. Despite the fact that a subset of 
credit unions without Federal share insurance--i.e., CDFI credit 
unions--have been permitted to become Bank members since 2010, it does 
not appear that the Banks have approved any such institutions for 
membership to

[[Page 66551]]

date. Consequently, the safety and soundness concerns arising from the 
Banks' relative lack of familiarity with the regimes that apply to 
credit unions that are subject to regulation and supervision only at 
the state level continue to exist and apply with equal validity to both 
CDFI credit unions and NFICUs.\29\
---------------------------------------------------------------------------

    \29\ The proposed rule would differ from the guidance letters in 
making clear that the exemption that applies generally to depository 
institutions that have received a composite rating of ``1'' does not 
apply to NFICUs. The guidance letters did not address this point 
directly.
---------------------------------------------------------------------------

    The Bank Act requires that the primary Federal banking regulators 
make available to the Banks, in confidence, reports of condition and 
other information relating to the condition of any Bank member or other 
institution with which a Bank contemplates having transactions 
authorized by the Bank Act, such as applicants for membership.\30\ That 
provision, however, does not apply to state banking regulators and the 
supervisory reports that they prepare relating to depository 
institutions organized under state law. Although many Banks have 
arrangements with state banking regulators, including state credit 
union regulators, under which those regulators provide the Banks with 
access to confidential supervisory information, including reports of 
examination, for the institutions they regulate, that may not be the 
case for every state. This raises a question as to whether a Bank may 
approve an application for membership received from an NFICU whose 
state regulator declines to provide the Bank with access to the reports 
of examination for its regulated entities or to allow the credit unions 
it regulates to disclose the composite rating derived from those 
examinations.
---------------------------------------------------------------------------

    \30\ 12 U.S.C. 1442(a)(1).
---------------------------------------------------------------------------

    Under the existing membership regulation, compliance with Sec.  
1263.11 creates a presumption that a depository institution applicant 
meets the statutory ``financial condition'' requirement. While failure 
to comply with Sec.  1263.11 creates a presumption that a depository 
institution applicant does not meet the ``financial condition'' 
requirement, that presumption of noncompliance may be rebutted. Section 
1263.17(d) provides that, if a depository institution applicant does 
not have a composite regulatory examination rating, does not have the 
minimum rating required by the regulations, or does not meet the 
performance trend criteria, the applicant may still meet the 
``financial condition'' requirement if it or the Bank prepares a 
written justification providing substantial evidence that is acceptable 
to the Bank that it is in a sound financial condition, notwithstanding 
its failure to meet one or more of the requirements of Sec.  
1263.11.\31\ Although FHFA encourages all of the Banks to reach 
agreements with the appropriate state regulators to allow them to 
review the reports of examination for all state-chartered depository 
institutions, a Bank may rely on the alternative provisions of Sec.  
1263.17(d) to rebut any presumption of noncompliance with the 
``financial condition'' requirement that arises from a state credit 
union regulator's decision not to provide a Bank with access to the 
reports of examination for its regulated entities.
---------------------------------------------------------------------------

    \31\ 12 CFR 1263.17(d).
---------------------------------------------------------------------------

4. Reports and Examinations--Sec.  1261.31
    Existing Sec.  1263.31 sets forth a number of stipulations to which 
each Bank member is deemed to have agreed as a condition precedent to 
becoming a Bank member. Under paragraph (b) of this section, each 
institution admitted to Bank membership agrees that reports of 
examination by local, state or Federal agencies, or institutions may be 
furnished by those authorities to the Bank or to FHFA upon request. The 
proposed rule would revise Sec.  1263.31(b) to specify that, with 
respect to any member that is an NFICU or CDFI credit union, the member 
also agrees that reports of examination by any private entity that 
provides it with share insurance may be furnished to the Bank or to 
FHFA. To the best of FHFA's knowledge, there is only one insurance 
company in the United States currently providing private share 
insurance for state-chartered credit unions.
    Under existing Sec.  1263.31(e), each institution also agrees, as a 
condition of Bank membership, that it will provide to the Bank, within 
20 days of filing, copies of reports of condition and operations filed 
with its appropriate Federal banking agency. The proposed rule would 
revise that provision to state that each member also agrees to provide 
any reports of condition and operations it may be required to file with 
its appropriate state regulator and that each member that is an NFICU 
or a CDFI credit union agrees to provide any such reports it may be 
required to file with a private entity providing it with share 
insurance.

IV. Consideration of Differences Between the Banks and the Enterprises

    Section 1313(f) of the Safety and Soundness Act requires the 
Director of FHFA, when promulgating regulations relating to the Banks, 
to consider the differences between the Banks and the Enterprises 
(Fannie Mae and Freddie Mac) as they relate to: The Banks' cooperative 
ownership structure; the mission of providing liquidity to members; the 
affordable housing and community development mission; their capital 
structure; and their joint and several liability on consolidated 
obligations.\32\ The Director also may consider any other differences 
that are deemed appropriate. In preparing this proposed rule, the 
Director considered the differences between the Banks and the 
Enterprises as they relate to the above factors, and determined that 
the rule is appropriate. FHFA requests comments regarding whether 
differences related to those factors should result in any revisions to 
the proposed rule.
---------------------------------------------------------------------------

    \32\ 12 U.S.C. 4513(f).
---------------------------------------------------------------------------

V. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) requires that FHFA 
consider the impact of paperwork and other information collection 
burdens imposed on the public.\33\ Under the PRA and the implementing 
regulations of the Office of Management and Budget (OMB), an agency may 
not collect or sponsor the collection of information, nor may it impose 
an information collection requirement unless it displays a currently 
valid control number assigned by OMB.\34\ FHFA's regulation ``Members 
of the Federal Home Loan Banks,'' located at 12 CFR part 1263, contains 
several collections of information that OMB has approved under control 
number 2590-0003, which is due to expire on December 31, 2016. The 
proposed rule would not make any revisions that would affect the burden 
estimates for those collections of information. Therefore, FHFA has not 
submitted any materials to OMB for review.
---------------------------------------------------------------------------

    \33\ See 44 U.S.C. 3507(a) and (d).
    \34\ See 44 U.S.C. 3512(a); 5 CFR 1320.8(b)(3)(vi).
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act \35\ (RFA) requires that a 
regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation will not 
have a significant economic impact on a

[[Page 66552]]

substantial number of small entities.\36\ FHFA has considered the 
impact of the proposed rule under the RFA. The General Counsel of FHFA 
certifies that the proposed rule, if adopted as a final rule, is not 
likely to have a significant economic impact on a substantial number of 
small entities because the regulation applies only to the Banks, which 
are not small entities for purposes of the RFA.
---------------------------------------------------------------------------

    \35\ 5 U.S.C. 601, et seq.
    \36\ See 5 U.S.C. 605(b).
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 1263

    Federal home loan banks, Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons stated in the SUPPLEMENTARY INFORMATION, and under 
the authority of 12 U.S.C. 4511, 4513, and 4526, FHFA proposes to amend 
part 1263 of subchapter D of chapter XII of title 12 of the Code of 
Federal Regulations as follows:

PART 1263--MEMBERS OF THE BANKS

0
 1. The authority citation for part 1263 continues to read as follows:

    Authority:  12 U.S.C. 1422, 1423, 1424, 1426, 1430, 1442, 4511, 
4513.

0
 2. Amend Sec.  1263.1 as follows:
0
 a. Revise the definitions of ``CDFI credit union'' and ``Community 
development financial institution or CDFI'';
0
 b. Add, in alphabetical order, a definition for ``Federal share 
insurance'';
0
 c. Revise the definition of ``Insured depository institution'';
0
 d. Add, in alphabetical order, a definition for ``Non-federally-
insured credit union''; and
0
 e. Revise the definition of ``Regulatory financial report''.
    The revisions and additions read as follows:


Sec.  1263.1  Definitions

* * * * *
    CDFI credit union means a State-chartered credit union that does 
not have Federal share insurance and that has been certified as a CDFI 
by the CDFI Fund.
* * * * *
    Community development financial institution or CDFI means an 
institution that is certified as a community development financial 
institution by the CDFI Fund under the Community Development Banking 
and Financial Institutions Act of 1994 (12 U.S.C. 4701 et seq.), other 
than a bank or savings association insured under the Federal Deposit 
Insurance Act (12 U.S.C. 1811 et seq.), a holding company for such a 
bank or savings association, or a credit union that has Federal share 
insurance.
* * * * *
    Federal share insurance means insurance coverage of credit union 
member accounts provided by the National Credit Union Share Insurance 
Fund under subchapter II of the Federal Credit Union Act (12 U.S.C. 
1781 et seq.).
* * * * *
    Insured depository institution means:
    (1) An insured depository institution as defined in section 2(9) of 
the Bank Act, as amended (12 U.S.C. 1422(9)); and
    (2) To the extent provided under Sec.  1263.19, a non-federally-
insured credit union.
* * * * *
    Non-federally-insured credit union means a State-chartered credit 
union that does not have Federal share insurance and that has not been 
certified as a CDFI by the CDFI Fund.
* * * * *
    Regulatory financial report means a financial report that an 
institution is required to file with its appropriate regulator on a 
specific periodic basis, including the quarterly call report for 
commercial banks and savings associations, quarterly or semi-annual 
call report for credit unions, NAIC's annual or quarterly statement for 
insurance companies, or other similar report, including such report 
maintained by the appropriate regulator in an electronic database.
* * * * *


Sec.  1263.2  [Amended]

0
 3. Amend Sec.  1263.2:
0
 a. By removing the word ``1263.18'' wherever it appears and, in its 
place, adding the word ``1263.19''; and
0
 b. In paragraph (b), by adding after the final period the words ``In 
preparing a digest for a non-federally-insured credit union applicant, 
the Bank shall summarize the manner in which the applicant has complied 
with the requirements of Sec.  1263.19(a).''.


Sec.  1263.3  [Amended]

0
 4. Amend Sec.  1263.3, in paragraph (c), by removing from the second 
sentence the words ``a Bank'' and adding in their place the words ``the 
Bank''.


Sec.  1263.11  [Amended]

0
 5. Amend Sec.  1263.11, in paragraph (b)(3)(iii), by removing the 
words ``A CDFI credit union applicant'' and adding in their place the 
words ``An applicant that is a CDFI credit union or a non-federally-
insured credit union''.

Subpart C--Eligibility Requirements

0
 6. Add Sec.  1263.19 and move it from subpart D to subpart C.
    The addition reads as follows:


Sec.  1263.19  Non-federally-insured credit unions.

    (a) Applicants. Except where otherwise provided, a non-federally-
insured credit union applying to become a member of a Bank shall be 
treated as an insured depository institution for purposes of 
determining its eligibility for membership under this part, provided 
that all of the following requirements have been met:
    (1) Provisional completion of application. After a non-federally-
insured credit union initiates the application process, the Bank shall 
obtain from the applicant all information required by this part, and 
any other information the Bank deems necessary, to process the 
application, except for the items required under paragraphs (a)(2) and 
(3) of this section. Upon obtaining all such information, the Bank 
shall notify the applicant in writing that its application is 
provisionally complete and that, in order to complete the application 
process, it must comply with paragraph (a)(2) of this section and 
subsequently provide one of the items listed in paragraph (a)(3) of 
this section.
    (2) Request to regulator. After receipt of the notice required 
under paragraph (a)(1) of this section, the applicant shall send to its 
appropriate State regulator a written request for a determination that 
the applicant meets all requirements for Federal share insurance as of 
the date of the request. The applicant shall provide to the Bank a copy 
of that request simultaneously with its transmittal to the regulator.
    (3) Final completion of application. The Bank shall deem an 
application to be complete, and shall act upon the application in 
accordance with Sec.  1263.3(c), upon obtaining from the applicant any 
one of the following items:
    (i) A written statement from the applicant's appropriate State 
regulator that the applicant met all of the eligibility requirements 
for Federal share insurance as of the date of the request sent pursuant 
to paragraph (a)(2) of this section;
    (ii) A written statement from the applicant's appropriate State 
regulator that it cannot or will not make a determination regarding the 
applicant's eligibility for Federal share insurance; or
    (iii) A written statement from the applicant, prepared no earlier 
than the

[[Page 66553]]

end of the six-month period beginning on the date of the request sent 
pursuant to paragraph (a)(2) of this section, certifying that the 
applicant did not receive from its appropriate State regulator within 
that six-month period either a response as described in paragraph 
(a)(3)(i) or (ii) or a response stating that that the applicant did not 
meet all of the eligibility requirements for Federal share insurance as 
of the date of the request sent pursuant to paragraph (a)(2) of this 
section.
    (b) Members canceling Federal share insurance. A Bank member that 
is a federally insured credit union and that subsequently cancels its 
Federal share insurance may remain a member of the Bank, subject to all 
regulatory provisions applicable to insured depository institution 
members, provided that the Bank has determined that the institution has 
canceled its Federal share insurance voluntarily.

Subpart E--Withdrawal, Termination, and Readmission

0
 7. Revise the heading of subpart E to read as set out above.
0
 8. Amend Sec.  1263.31 by revising paragraphs (b) and (e) to read as 
follows:


Sec.  1263.31  Reports and examinations.

* * * * *
    (b) Agrees that reports of examination by local, State, or Federal 
agencies or institutions, or by any private entity providing share 
insurance to a member that is a non-federally-insured credit union or a 
CDFI credit union, may be furnished by such authorities or entities to 
the Bank or FHFA upon request;
* * * * *
    (e) To the extent applicable, agrees to provide to the Bank, within 
20 days of filing, copies of reports of condition and operations 
required to be filed with:
    (1) The member's appropriate Federal banking agency;
    (2) The member's appropriate State regulator; or
    (3) Any private entity providing share insurance to a member that 
is a non-federally-insured credit union or a CDFI credit union.

    Dated: September 22, 2016.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2016-23289 Filed 9-27-16; 8:45 am]
 BILLING CODE 8070-01-P